In 1886, a young man named Richard Warren Sears was working as a telegram operator at a train station, just making enough to get by, when a jeweler rejected a shipment of watches. Richard sold them himself, made $5,000 in profit, and decided he would start his own mail-order watch business. These humble beginnings were the start of the world’s first “everything store,” Sears. Recently, Sears filed for bankruptcy, and has been closing stores all over the country. But for nearly 130 years, they were the first place America looked for what they needed. How did this mighty brand fall? Host Dana Barrett looks at the vision, the innovation, the changing consumer trends, and the corporate malfeasance that all played their part in the rise and fall of the megastore in this episode of Bizography.
Throughout the episode, the parallels to Amazon are clear: Dana points out that new technology was a factor in Sears’ success, just like with Amazon. In Amazon’s case, it was the Internet; for Sears, it was trains. “They both started with one product, but they had a bigger vision. With Sears, what he saw was the ability of the railroads to get things to people who didn't have access to them otherwise,” Dana says. “And he found a way through the mail...using the trains to move things around the country in a way that they had never been moved around before.”
When selling watches started to look like a good full-time gig for Richard, he decided he needed a partner, a young watch repairman named Alvah Curtis Roebuck. After they partnered up, they started expanding the business, adding diamonds and jewelry. Soon, they had a 507-page catalog, selling everything from clothes and watches to sewing machines and saddles. (Fun fact, you could also buy chastity belts and opium for a time, as well.) “Richard Warren Sears himself wrote almost every single word in that catalog,” Dana says. They were also the first company to offer a money-back guarantee, so people would feel safe about making these major purchases through the mail.
With so many different products, Dana says, it’s hard to connect to what you sell, so Sears connected to the customer. “They cared, in theory, about the farmers...rural customers,” Dana said, which is why they sold baby chickens, farm equipment, even full, DIY “kit houses.” They also started marketing through radio, buying their own station called WLS and essentially creating the first infomercials. They even had a Sunday night radio show called “National Barn Dance” that was “literally the most popular radio show in the Midwest.”
Eventually, of course, they moved from a mail-order business to a brick-and-mortar one, opening physical locations, getting into malls, and so on. “They moved from caring only about rural customers to embracing this suburban customer, who really became their mainstay,” Dana says. “And things were going amazingly well.” In addition to all these innovations, they created several successful brands in-house, like Allstate Insurance, Kenmore Appliances, and Craftsman Tools. And, of course, in 1973, they completed the Sears Tower, at the time the tallest building in the world at 110 stories. It seemed that no one could topple Sears from the top of the consumer food chain. But, as Dana says, “They were starting to struggle a little bit, they were losing some of that vision they had in their earlier days.” Other big-box retailers opened, like Target and Wal-Mart, further endangering the brand. Profits were being cut in half; something had to be done. “So they ended up...merging with K-Mart under the name Sears Holdings...in 2005. And this is where the evil villain of the story enters the picture,” Dana tells us: Eddie Lampert, CEO and chairman of Sears Holdings. “This is a guy who is selling parts of the company off...in theory to save the company,” Dana says. “But the sketchy part is, he...sold the pieces off to other holding companies of which he personally had an interest. He’s basically scraping the meat off the bones.” And while Sears goes through bankruptcy and lays off thousands of workers, the people in charge are giving themselves huge bonuses. “It's one of my biggest pet peeves of the bankruptcy courts,” Dana fumes.
What did Eddie do to torpedo this long-standing brand? Is there a future for Sears? Do we need bankruptcy reforms? And, most importantly, is Jeff Bezos taking note of this cautionary tale? Dana certainly hopes so. Listen to the episode to find out more about the meteoric rise and eventual downfall of “Amazon 1.0” on Bizography.
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